Etsy succeeds with its Amazon-opposite approach

Etsy, the online marketplace for handmade and artisan goods, announced better than expected results during its first quarter as the site saw its traffic and revenue grow for the third consecutive quarter.

The site’s improving results, CEO Josh Silverman said on Etsy’s earnings call, are tied to its ability to differentiate in the marketplace.

“In a world where e-commerce is increasingly commoditized, Etsy provides a differentiated experience where extraordinary goods handcrafted by creative entrepreneurs all over the world are made for you,” said Mr. Silverman (via Seeking Alpha).

“At Etsy, we believe that life is full of special moments that deserve imagination and a human touch; moments of gifting, celebration and trial. Those moments happen often, a wedding, a first day of school, an important meeting, a birthday or a holiday,” he added.

CNBC’s Jim Cramer asked Mr. Silverman about the impact of Amazon.com on Etsy’s business. Etsy’s CEO responded that the two companies were in fundamentally different businesses. Mass retail operations such as Amazon are about selection, price and convenience. Amazon achieves low prices by buying items in bulk.

“If you can buy 1,000 of anything, it doesn’t belong on Etsy,” Mr. Silverman said. “In terms of convenience, they [Amazon] warehouse everything in advance so they can ship it to you [the] next day. Well, a great many items on Etsy are made to order, so you simply can’t warehouse them in advance.”

On this week’s earnings call, Mr. Silverman said Etsy has focused on four key initiatives to achieve success: “improving search and discovery, trust and reliability, marketing capabilities, and solid tools and services.”

Improvements in the site’s search capabilities has led to higher conversion rates among both new and repeat customers. Successful shopping visits, in turn, are helping Etsy create higher lifetime value customers.

Etsy, with its custom-made products would seem to be outside Amazon’s sweet spot, but no retailer is Amazon-proof. The question is why would Amazon want to play in Etsy’s field? As long as Etsy stays true to its brand and continues to better its search and overall shopping experience, consumers will continue to buy.

Etsy is Amazon proof in much the same way that the Grove Park Artisan’s Arcade in Asheville, NC is insulated from the local Walmart. Mr. Silverman’s comment that “if you can buy 1,000 of anything, it doesn’t belong on Etsy” sums up the strategy perfectly.

Paula – if you want to trade pithy answers … obviously, in the end, the customer makes the decision on where and what to buy. But Amazon Handmade is largely unknown, even by industry commentators. If/when Amazon wants to turn it into a revenue source or if/when Amazon feels like crushing Etsy or others, the consumer will certainly gain ample awareness of Amazon’s Etsy alternative and have more marketplace options.

Amazon Handmade had a big booth at last month’s American Craft Council convention here in St. Paul, trying to get producers to sign up. And a whole lot of nobody stopping at it, even to pick up swag bags.

The answer lies in the definition of relatively. There is no question the business models are very different. One is definitely mass market and the other specialty. Could Amazon ever create a similar marketplace? Certainly, if it chose to do so. However, should it decide to enter a similar business IMHO it would simply buy Etsy or a similar company.

Will there ever be a business model that moves craft industries to mainstream commerce? Unique artisan products add to the fabric of life’s pleasures, at the opposite end of the mass merchandise scale. Vive la difference!

Amazon could easily open a hand-crafted market area, but likely it would not be a priority. Etsy should continue to stay true to its core values and increase the human connection points among its community. It can act as its own social network and grow from its base!

Etsy is only “Amazon Proof” because their model doesn’t fit the current Amazon model for sales velocity. If there’s anything that we’ve learned in the last 18 months, is nobody is “anything proof.”

The onus on Etsy to keep iterating is really key — the artisan experience they bring is something the market loves. Ergo, someone else will come along and try and do what they do. It could be Amazon, it could be someone else.

It is great to see that Etsy is doing so well and shows what retailers, either online or bricks & mortar stores, can do in the face of Amazon. The hype that Amazon will rule the world is way off the mark. Retailers are smart creative and very agile — they will be able to survive and prosper in the Amazon world. As Josh Silverman says, you just have to find a different model to that of Amazon and not take them head on. When the Hypermarkets first came along, everyone said the high street would die. It did not and in Europe is actually on the increase again because convenience has become more important, similarly choice, design and quality will provide plenty of opportunity for smart retailers to compete successfully with Amazon. This is just the start of the response and over time we will see a growth in alternatives to the mighty Amazon. People are not devoted to Amazon and their recent increase in price for Prime has shown them for what they… Read more »

Smart. “Amazon Can’t Do That” is a great strategy, it’s just getting to be a smaller and smaller list. Sam Walton said the same thing, “it’s easy to compete with us, just do what we don’t do” — also easier said than done, but going head on with giants is usually a losing cause. Leave that work to other giants, like Walmart.

Amazon-proof is a strong term in today’s retail climate. However, there is a lot of truth in the above about Etsy and Amazon being very different businesses. In fact, it’s indicative of the wider retail industry – we see the middle disappearing more and more and retailers either focusing on value and convenience or a more specialist, premium offering. The draw for customers is that Etsy is about the hand-made, you’re buying into the creator and their expertise, whereas Amazon is all about mass sales. Amazon did try to move into Etsy’s patch with the Maker Marketplace but it hasn’t seen the same traction.

In a world of soulless commodity, artisan, heart-fueled products created with care become the things that we covet and cherish. Etsy knows this, and I applaud them. They also have done brilliant things with resale, as those items also hold history and exclusivity.

People buy stuff on Amazon … they buy stories on Etsy. A shopper chooses one over the other purposefully, and I can’t imagine that Amazon could ever overtake the authenticity and imagination that Etsy has captured. They are totally different buying occasions. And they are rooted in very different culture codes.

Amazon’s strength is knowing customers and improving operations so customers can get what they want, when they want it, and delivered how they want it at a good price. No business is immune to that model. Mr. Silverman’s four key initiatives are evidence of that.

The big difference is that Etsy is fishing in a particular type of products that are hand crafted and one of a kind, so price points and time to delivery is currently different from consumers’ expectations of Amazon. Etsy caters to a niche market with different product, price, and delivery expectations. That is not likely to keep them Amazon-proof forever.

Our business sells on Etsy since 2009 and Handmade at Amazon from beta. I will tell you the difference from the field. First, Mr. Silverman is doing a magnificent job turning Etsy around. Second, my experience comes from the 3% that is not work from home makers. In other words, you can buy 1,000 of something from us. This type of business model on Etsy makes selling via Amazon Prime part of the equation, which we do. The shopper on Etsy is loyal and passionate. It is easy for the Etsy seller to establish a relationship with the buyer because of the “storefront” and the conversation system. The Etsy messaging is superior to anything out there. We will not provide customization on Amazon and buyers don’t want a relationship. You can build a brand on Etsy, Amazon is simply a transaction. Amazon will not, because they should not, create the kind of experience for customer service, curation and messaging that a marketplace like Etsy masters. My last pont is wholesale. Etsy will not talk about… Read more »

This is a great inside perspective from the “other side” comprising the minority of Etsy vendors. That other 97% is really what makes Etsy unique and Amazon, especially the Prime incentive, irrelevant. Artisans making batches of 1-50 unique items from home or small workshops every month to sell out within minutes upon release are the core of Etsy. As a very frequent shopper within each platform I can vouch that they offer very different benefits to consumers. Prime shipping would never be relevant for the majority of Etsy offerings that have long lead times for production. Amazon would have to abandon their core strengths and adopt those of Etsy to truly compete.

Must everything be defined in terms of how close it is – or isn’t – to Amazon? Etsy’s success is ultimately due to the same reason: they’re offering a product people want. But I think that has been true of every successful business since the start of time. They will remain successful if they continue doing what they have been — being an intermediary between artisans and those who seek such products — and by ignoring the advice of people who want to “improve” their model.

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"Etsy should continue to stay true to its core values and increase the human connection points among its community. "